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Published on Monday, November 9, 2020

On the Beach refunds pile up as Covid impact 'every bit as extreme' as feared



On the Beach expects to break even in the 12 months to September despite savage trading conditions, mass cancellations and refund pay outs totalling £160 million.


The online retailer said it has returned £70m to consumers for hotel reservations and transfers, and £90m for flight bookings since March.


It warned that refunds from airlines continue to suffer 'substantial delays'.


"The Group continues to pursue these rightful refund claims on behalf of its customers," it said.


With booking volumes down 75% in the third quarter and 53% in July, August and September, Chief Executive Simon Cooper said it was clear 'the full impact of Covid-19 will be every bit as extreme as any of us could have mapped out'.


More than 90% of summer 2020 bookings were cancelled, a figure described by On the Beach as 'well above our assumption at the half year'.


That picture is likely to continue over the winter, the retailer said in a trading update.


"This has led to further exceptional costs of £10m in H2 which the group now expects to be £45m for the full year," it added


"Following the reopening of airspace in early July, the Group was pleased that its customers were once again able to enjoy international beach holidays, albeit this freedom was short-lived and the subsequent impact on consumer confidence has led to significant reductions in seat capacity over the winter," On the Beach said. "This position has now been further exacerbated by a four week ban on international leisure travel which began on 5 November."


Adjusted profit before tax, excluding exceptional items and brand amortisation, is expected to be 'at breakeven levels'.


On the Beach said it has 'worked hard' to refund customers in cash and in full from its 'ring-fenced customer trust account'.


Of the £90m flight refunds, the firm said it has received £79m from airlines.


"We are awaiting refunds for cancelled flights of £11m where we have refunded flight costs in advance of receipt in order to protect the brand and generate customer goodwill."


The company has cash of £44m, excluding customer prepayments which are held in the trust account.


"This cash figure will further increase as we continue to receive monies from airlines for cancelled flights where OTB has already provided customer refunds," the trading update said, adding that the group has access to a £75m credit facility which is undrawn.


Chief Executive Simon Cooper said:  "I would like to take this opportunity to thank all of my colleagues for their continued hard work and resilience in the most challenging times to have ever faced the travel industry.


"It is clear now that the full impact of Covid-19 will be every bit as extreme as any of us could have mapped out at the beginning of the year. Following the overwhelming support we received from our shareholders in May, combined with our ring-fencing of customer prepayments, we are in a strong and debt-free financial position.


"The Board is confident about the Group's long term strategy and we will continue to look at the increasing number of exciting opportunities to grow our market share both in the UK and internationally."


The company added that it is well 'well-positioned to sustain further significant disruption and to grow market share as demand for holidays recovers'.

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